A home purchase can be the most significant transaction most of us might ever encounter. It doesn't matter if where you raise your family, a seasonal vacation property or a rental fixer upper, purchasing real property is a complex transaction that requires multiple parties to make it all happen.
It's likely you are familiar with the parties having a role in the transaction. The most familiar person in the exchange is the real estate agent. Next, the mortgage company provides the money required to fund the transaction. And the title company ensures that all requirements of the transaction are completed and that a clear title transfers from the seller to the buyer.
So, who makes sure the value of the property is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from ACRE Appraisals will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at ACRE Appraisals is to inspect the property to ascertain its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the condition a reasonable buyer would expect them to be. To ensure the stated size of the property is accurate and describe the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.
Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser gathers information on local construction costs, the cost of labor and other factors to derive how much it would cost to construct a property similar to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At ACRE Appraisals, we are an authority when it comes to knowing the worth of real estate features in Mobile and Mobile County neighborhoods. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing a property is sometimes employed when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of revenue the property yields is factored in with income produced by nearby properties to determine the current value.
The Bottom Line
Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that while this amount is probably the best indication of what a house is worth, it may not be the final sales price. Depending on the specific circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. Here's what it all boils down to, an appraiser from ACRE Appraisals will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.